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Week Ahead (16 May)

W/C Monday, 16 May - New coalition likely to be formed in North Rhine-Westphalia following election

Sunday's regional election in Germany’s most populous state, North Rhine-Westphalia, was won by the centre-right Christian Democrats, who will this week begin the process of putting together a new coalition for the state. The CDU has governed the region since 2017 in a coalition with the libertarian Free Democrats (FDP), with the SPD in opposition.  The Green Party more than doubled its share of the vote in the region and may now become the kingmaker in post-election talks.

However, electoral mathematics mean that a coalition mirroring that in place at Federal level is now possible. The election was widely seen as a gauge of the first six months in office of the new German Chancellor, Olaf Scholz. His SPD lost by some distance in what will be seen as a blow to his party's agenda for governing as the German states have significant devolved power.

Monday, 16 May – Johnson to talk with NI Parties on future of protocol

Boris Johnson will visit Belfast today to discuss the future of Northern Ireland's political institutions, amid conflicting reports around his government's intentions towards the Northern Ireland Protocol. Johnson will meet with leaders of all the main political parties in the North. Sinn Féin won the recent Assembly election but cannot form an administration as the DUP, which came second, has refused to nominate a speaker for the Executive, a key step under Northern Ireland's power-sharing system.


The DUP maintains that there are serious concerns around the implementation of the protocol, which it sees as undermining Northern Ireland’s position within the United Kingdom, and has called for the British government to use "action, not just words", to satisfy its difficulties.

If the UK proceeds to act unilaterally, Brussels is likely to react poorly.  Such a move could trigger the collapse of the withdrawal agreement, the imposition of tariffs and the beginning of a trade war at a time of high energy prices, rapid inflation and international instability, an unsatisfactory outcome for all parties.   

Monday, 16 May - EU foreign ministers to meet to discuss 6th package of sanctions against Russia

Talks on a sixth package of sanctions targeting the Russian leadership and economy are ongoing across the institutions. Today EU foreign ministers will meet to discuss negotiations on the package to date amid struggles to achieve unity across the member states on the issue of placing an embargo on Russian oil.

A move towards a new set of sanctions was given fresh impetus in late April when Russia responded to Bulgaria and Poland’s refusal to pay in roubles for gas imported from Russia by cutting off their access to gas pipelines.  The European Commission President, Ursula Von der Leyen, described the decision as “blackmail”.  The move has stoked fears that Russia could expand this policy to other member states.   

Gathering a consensus across member states on how to proceed has proven difficult. Hungary, the Czech Republic and Slovakia have all expressed their concerns that embargoing Russian oil would have a severe effect on their economy. While compromise has been offered by the Commission to these countries, in effect delaying the imposition of a ban on Russian oil until 2024 for them, Hungary has still not given its approval, with right-wing Prime Minister Viktor Orban keen to avoid the fallout from a loss of Russian oil supplies. He has recently likened the effect of such an embargo to an atomic bomb hitting the Hungarian economy.

Tuesday, 17 May – European Parliament to vote on amendments to digital policy programme

The European Parliament is expected to vote on amendments to its digital policy programme on Tuesday.  The vote will lead to interinstitutional negotiations between Parliament and the European Council, which adopted its position on the programme on 11 May.  According to reports, the Council has included in its draft a target of making companies benefitting from the digital transition contribute to the running and upgrading costs of European network infrastructure.   

The Council’s position will be welcomed by the European Telecommunications Network Operator's Association, a telco industry group, which recently released a report calling for tech and streaming companies to pay their fair share of the costs. 


Wednesday, 18 May – Eurostat to release latest HICP inflation statistics

Eurostat will release inflation data for April on Wednesday.  Preliminary readings released at the end of April showed that inflation had risen to 7.5% in the euro area, up marginally from the 7.4% recorded in March, but still at a record high level. 

Given expectations that inflation will hit new highs for April, ECB Governing Council members have become increasingly vocal about an imminent rise in interest rates.  While hawks have been pushing for action to combat rising inflation for several months the ECB President Christine Lagarde has so far resisted the temptation to act.  However, Gabriel Makhlouf, Governor of the Central Bank of Ireland, yesterday joined others in calling for the first interest rate increase for ten years.  Indeed, Lagarde suggested on Wednesday that a rates increase could follow soon after the ending of the ECB’s regular asset purchase programme. 

The release of the minutes of the ECB's April meeting will also be released on Thursday, and should give an indication as to the scale of the debate entered into by members of the Governing Council on an earlier than expected interest rate rise.

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